New U.S. tariffs of 15% on many European exports are projected to reduce eurozone GDP by 0.7% through 2027. However, European Central Bank economists argue that the bloc can fully recoup these losses by making relatively modest reductions in its own internal trade barriers.
Major Points:
Impact of U.S. Tariffs: President Trump's tariff hikes impose a 15% duty on many EU exports to the U.S., which is estimated to cut eurozone GDP by 0.7% by 2027.
The "Single Market" Solution: The ECB proposes that reducing trade barriers within the EU single market could completely offset the economic damage from U.S. tariffs.
High Hidden Costs: Currently, fragmented national regulations create huge hidden costs for intra-EU trade—equivalent to a 67% tariff on goods and a staggering 95% tariff on services sold across borders.
Modest Change, Major Gain: A reduction of just two percentage points in these internal barriers could generate enough economic growth to match the losses from U.S. tariffs.
Broader Context & Challenge: The push for deeper European integration is also a response to heightened Chinese competition. While seen as the "only viable path forward," progress is slow, and the benefits would take time to materialize, requiring sustained regulatory and political effort.
